The U.S. Commodity Futures Trading Commission has filed charges against three separate companies for engaging in fraudulent schemes involving cryptocurrencies. The cases include fraud and misappropriation of bitcoin and litecoin.
CFTC Sues Crypto Operators
The U.S. Commodity Futures Trading Commission (CFTC) filed civil enforcement actions in a New York District Court on Thursday against three separate cryptocurrency operators for allegedly defrauding customers and breaking commodity trading rules. The agency proceeded to post details of two of the cases on its website on Friday.
The first case concerns Colorado resident Dillon Michael Dean and his UK-registered company, the Entrepreneurs Headquarters Ltd. They solicited $1.1 million worth of bitcoin from over 600 members of the public from April 2017 to the present, promising to convert them into fiat currency and invest in a pooled investment vehicle such as binary options. Dean claims to have “strong skills” in options trading and customers were promised high rates of return, the CFTC detailed.
However, the derivatives watchdog alleges that the defendants did not trade on behalf of their customers but misappropriated over $1 million in customers’ funds. Dean also launched another similar trading venture called Real Trade Profits.
Citing that the defendants failed to register with the Commission as a Commodity Pool Operator (CPO) and Associated Person of a CPO, the agency stated:
The CFTC Complaint charges the defendants with engaging in a fraudulent scheme to solicit bitcoin from members of the public, misrepresenting that customers’ funds would be pooled and invested in products including binary options, making Ponzi-style payments to commodity pool participants from other participants’ funds, [and] misappropriating pool participants’ funds.
Bitcoin and Litecoin Related Fraud
The second case concerns Patrick K. Mcdonnell and his company Cabbage Tech. Corp., doing business as Coin Drop Markets (CDM)…